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Summary:

Two days in Chattanooga, Tenn. show how a municipal broadband network can pay dividends when community leaders focus on the applications a gigabit network can deliver and consider the long-term economic development potential. And yes, it can even generate enough revenue to become profitable.

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Edit Note: This is the second of a two-part series on Craig Settles’ visit to Chattanooga, Tenn. to see what a gigabit network can offer a community. The first article can be found here.

“We have three main goals for Chattanooga’s broadband network,” says EPB President Harold DePriest, who oversaw the public utility’s $300 million investment in the network. “Use it to modernize our electric power infrastructure. Generate enough revenue for the network to pay for itself and be a catalyst for economic development.”

After spending two days in Chattanooga meeting with various stakeholders, it’s easy to see the network exceeding those goals.

EPB’s new smart grid, enabled by a gigabit of digital horsepower, can reduce hour-long power interruptions down to a few seconds. When eight twisters hit Chattanooga within 24 hours, the smart grid saved an estimated 730,000 outage minutes, as well as 250 unnecessary truck rolls. Financially, the network launched in September 2009 and had its first profitable month 18 months later. With all investment variables aside, it should start generating enough revenue to sustain operations by 2012. What’s more, EPB will capture millions of dollars is cost savings thanks to significant operational improvements.

LampPost founders want to use the gigabit network to encourage entrepreneurs in Chattanooga.

And it seems everywhere one looks, incubators, associations and regular businesses are all pulling together to make Chattanooga the place to be for forward-looking companies.

When you analyze the more than 130 communities running successful broadband networks, a common thread uniting them is strong leadership from top elected officials. Prior to Chattanooga’s network launch, incumbents in the area ran 2,600 ads attacking the project and asking citizens to write City Hall to protest the project. Thirty-eight people did. In response to the ads, one citizen wrote a letter to the editor asking neighbors to call City Hall if they felt EPB should build the network. Nearly 600 calls were logged supporting the project. Chattanooga’s mayor deserves much of the credit for rallying citizens behind the network project.

A Focus on Applications, Not Just Fiber

“This network is as important as anything we’ve done,” says Mayor Ron Littlefield. “The community itself is catching on to the value of the network in bits and pieces.” And how do you rally constituents to support an initiative involving technology many don’t understand? “We started by showing people how to solve common problems. That engages them. Then we show them how to tackle specialized problems. This makes them loyal supporters.”

Community stakeholders brainstorm for new gigabit application ideas.

EPB expands and strengthens community support with frequent briefing and brainstorming meetings with various stakeholders. Constituents keep up to date on developments and contribute a steady stream of ideas for network applications. These tactics cement customer loyalty even under an onslaught of competitive assaults. It’s impressive listening ideas build on each other as people hear about a particular feature or new application. The level of buy-in and word-of-mouth translate into significant revenue.

So what else has Chattanooga done? First, the city’s fiber overcomes one of muni Wi-Fi’s biggest original flaws: The mesh access points didn’t have enough horsepower for robust mobile applications and high data traffic. Chattanooga’s mesh design links a fiber strand to every third access point. The city could afford this because they built a set of mobile and machine-to-machine (M2M) applications that qualified them for six different grants. Rather than focus on “building a network,” the city focused on creating applications, won big pots of money that was pooled together and then built a superior wireless network that delivers 16 Mbps both upstream and downstream.

The city bought wireless radios that can be programmed to deliver WiMAX, should the city be so inclined, and it can incorporate existing local towers into the network to deliver LTE service in rural areas. Though this network is just for local governments in EPB’s 600-square-mile service area to share, other communities in the U.S. can put aspects of Chattanooga’s approach into play for consumer and business subscribers.

The Revenue Is in Applications, But the Returns Are in Economic Development

Economic development, though, is where long-term returns are. A common theme in discussions with business leaders and entrepreneurs was that the economic impact of the network is challenging to forecast, but easier to assess. According to Chris Daly, director of technology development and transfer for the Enterprise Center — which drives city economic development initiatives — “The difficulty is that the timeline you need to evaluate broadband’s impact on the local economy is so long, maybe two years or more, and so you have to review data retroactively. However, we know that when we look back, we’re going to see many changes to the local economy, because we’re seeing them already.”

SimCenter Enterprises CEO explains how gigabit networks can accelerate simulation development.

This makes evaluating the need for a gigabit network the ultimate “what if” exercise. What if a city had screaming fast outdoor wireless connectivity? What if the most disadvantaged youth could access a gigabit distance learning application at Harvard? What if local businesses could get real-time mentoring on global marketing from executives in China, Germany and Brazil?

SimCenter Enterprises in Chattanooga embodies this spirit. It’s a modeling and simulation company that uses high-performance computing to create or re-create scenarios to help predict the future. High-end modeling and simulation is a bandwidth hog if you want to loop in people working at other locations into the “what if” process. However, a gigabit network enables a small company in a mid-sized city to become the center of a world of supercomputers, international research teams and corporate giants.

Spending time in Chattanooga was a trip to see up close and personal what happens when a community asks, “What if we had a gigabit? What could we create, what can we change, how do we produce a stronger economy?” Chattanooga, along with many of the other communities that own their own broadband networks, are just beginning to find answers to a whole range of “what if” questions. Others, such Tacoma, Wash. and Santa Monica, Calif. have been answering the question for years. Undoubtedly, many more will follow them.

Craig Settles is a broadband industry analyst and Co-Director of Communities United for Broadband and can be found at @cjsettles on Twitter.

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